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Did Hedge Funds Drop The Ball On OSI Systems, Inc. (OSIS) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find write-ups about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of OSI Systems, Inc. (NASDAQ:OSIS) based on that data.

Is OSI Systems, Inc. (NASDAQ:OSIS) a buy here? Hedge funds are betting on the stock. The number of long hedge fund bets improved by 5 in recent months. Our calculations also showed that OSIS isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

Let’s go over the latest hedge fund action encompassing OSI Systems, Inc. (NASDAQ:OSIS).

How are hedge funds trading OSI Systems, Inc. (NASDAQ:OSIS)?

Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in OSIS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

OSIS_june2019

According to Insider Monkey’s hedge fund database, Winton Capital Management, managed by David Harding, holds the largest position in OSI Systems, Inc. (NASDAQ:OSIS). Winton Capital Management has a $7.2 million position in the stock, comprising 0.1% of its 13F portfolio. On Winton Capital Management’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $6.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions include Ken Grossman and Glen Schneider’s SG Capital Management, Joel Greenblatt’s Gotham Asset Management and Peter Muller’s PDT Partners.

As aggregate interest increased, some big names were breaking ground themselves. Winton Capital Management, managed by David Harding, established the most valuable position in OSI Systems, Inc. (NASDAQ:OSIS). Winton Capital Management had $7.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $6.3 million position during the quarter. The other funds with new positions in the stock are Ken Grossman and Glen Schneider’s SG Capital Management, Peter Muller’s PDT Partners, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now review hedge fund activity in other stocks similar to OSI Systems, Inc. (NASDAQ:OSIS). We will take a look at HNI Corp (NYSE:HNI), Heartland Express, Inc. (NASDAQ:HTLD), Saia Inc (NASDAQ:SAIA), and Glu Mobile Inc. (NASDAQ:GLUU). This group of stocks’ market valuations match OSIS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HNI 18 34722 0
HTLD 14 27625 7
SAIA 14 38736 -4
GLUU 25 130789 5
Average 17.75 57968 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $26 million in OSIS’s case. Glu Mobile Inc. (NASDAQ:GLUU) is the most popular stock in this table. On the other hand Heartland Express, Inc. (NASDAQ:HTLD) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks OSI Systems, Inc. (NASDAQ:OSIS) is even less popular than HTLD. Hedge funds clearly dropped the ball on OSIS as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on OSIS as the stock returned 29.5% during the same period and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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